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Under Armour Q3 2010 Earnings Call Transcript

Under Armour Q3 2010 Earnings Call Transcript

Under Armour (UA)

Q3 2010 Earnings Call

October 26, 2010 8:30 am ET


Brad Dickerson - Chief Financial Officer and Principal Accounting Officer

Tom Shaw -

Kevin Plank - Founder, Chairman, Chief Executive Officer and President


Eric Tracy - FBR Capital Markets & Co.

Taposh Bari - Jefferies & Company, Inc.

Oliver Chen

Sam Poser - Sterne Agee & Leach Inc.

Matthew McClintock - Barclays Capital

Omar Saad - Crédit Suisse AG

Chi Lee - Morgan Stanley

Robert Ohmes - BofA Merrill Lynch

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Michael Binetti - UBS Investment Bank

Jim Duffy - Stifel, Nicolaus & Co., Inc.



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Previous Statements by UA
» Under Armour Q2 2010 Earnings Call Transcript
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Good day, ladies and gentlemen, and welcome to the Under Armour, Inc. Third Quarter Earnings Webcast Conference Call [Operator Instructions] I would now like to turn the conference over to Mr. Tom Shaw. Please go ahead.

Tom Shaw

Thanks, and good morning to everyone participating on this morning's conference call. During the course of this conference call, we'll be making projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risk and uncertainties that could cause actual events or results to differ materially. These risks and uncertainties are described in our press release and in the Risk Factors section of our filings with the SEC. The company assumes no obligation to update forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

Joining us on today's call will be Kevin Plank, Chairman and CEO, who will address the drivers of our third quarter results and our strategy for continued growth in 2010 and beyond. Brad Dickerson, our Chief Financial Officer, will then discuss the company's financial performance for the third quarter, provide an updated outlook for 2010 and introduce our preliminary outlook for 2011. After the prepared remarks, Kevin, Brad and Wayne Marino, our Chief Operating Officer, will be available for Q&A session that will end by 9:30 a.m.

And with that, I'll turn it over to Kevin Plank.

Kevin Plank

Thank you, Tom, and good morning, everyone. At Under Armour, measuring success has always started with a scoreboard, and I'm going to get to that in just a moment. But as we complete year five as a public company, the measure of our success as a brand gets a little more complex.

So in addition to our quarterly numbers, I want to talk this morning about four benchmarks, by which we measure ourselves to ensure we are building our platform for long-term brand strength and long-term return to shareholders: Product, story, service and team.

But first, to our scoreboard. Our Apparel net revenues are up 30% year-to-date. We think that number speaks volumes, not only in our ability to continue resonating with our core consumer but to the strength and validity of our strategy. We believe that 30% year-to-date apparel net revenue growth is great evidence that there's still a tremendous opportunity for us in the U.S. Apparel business as we continue to lead in our core sporting goods accounts and gain traction outside of our core distribution.

For the quarter, our Apparel net revenue growth was extremely balanced with Men's, Women's and Youth, all growing at least 25%. In addition, our growth being broad-based, we continue to see our market share of dollars run ahead of market share of units, which we believe is a great indicator that our consumer remains willing to pay a premium for Under Armour apparel. We have consistently talked about building our Women's business to be larger than our Men's. This past quarter, the dollar growth in wholesale women's training apparel, our largest category in Women's, was equal to the dollar growth we saw in men's training apparel. Well, that is just a snapshot, we think it's a great sign that we've established the right cadence to build the same level of equity and loyalty among our female consumers as we know exist with our core male consumer.

So to become strong in areas like Women to Direct-to-Consumer, we are also able to invest in areas where the opportunity is even larger. First, there is Footwear. In this past weekend, consumers got their first taste of Under Armour basketball footwear. And while a few days of sell-through are an accurate measure of how well we've been received, we are much more confident about our entry into this important category because of the approach we've taken, and because of what we have learned and now applied to basketball with the experience for the past five years of building footwear.

By the time our first basketball footwear arrived in sort of last week, literally hundreds of the country's best players have tried our product and given us feedback. That process has helped us deliver a basketball shoe that works for the player and gives us confidence that we will see a return to growth in our Footwear business in 2011.

Outside the U.S., the Under Armour brand continues to gain traction and build a base for long-term growth. Our International business grew 60% in the quarter, with both Europe and Japan showing very strong growth. In Europe, our base player continues to lead the way, but we are making strides for diversifying our apparel mix as our fitted product grows as a percentage of our business, moving into 2011. We're also bringing grassroots marketing to our European business. As of the past quarter, we brought hundreds of young athletes to the Under Armour Rugby Combines in the U.K.

Our business in Japan continues to perform exceptionally well, where our partners, Dome Corporation will pass $100 million in sales in 2010 as they continue to push forward, including the launch of the first non-cleated footwear for the Japanese consumer this quarter. We also saw the first UA brand in full price retail store opened outside the U.S. as Dome opened the UA clubhouse in Tokyo. Our success in Japan and the traction we are gaining in U.K. are great indicators of our ability to speak to athletes who play something other than American football, and better position us to succeed in new categories to help drive our growth.

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